China’s rural rejuvenation rationale reveals that domestic waste management (DWM), as a gateway to habitat enhancement, is a critical policy pathway for achieving sustainable rural development. This paper analyzes the influence of capital endowment (CE) and environmental literacy (EL) on farmers’ willingness to pay (WTP) for DWM through a binary logistic model, focusing on the Yangtze River Delta region, with 571 farmers contributing validated responses. It also conducts a more in-depth exploration of the regulatory role of EL and the influence of CE on WTP for DWM. The findings are as follows: (1) CE and sub-dimensions of economic capital and psychological capital yield a substantial positive effect on WTP for DWM. (2) CE and sub-dimensions of economic capital, human capital, and psychological capital yield a substantial positive effect on LOP for DWM. (3) EL and sub-dimensions of ER, EP, and EKS exert a notably positive influence on WTP and LOP for DWM. (4) EL functions as a moderator in the effect of CE on WTP for DWM. Based on this, this paper puts forward some policy suggestions to improve farmers’ WTP for DWM from two aspects: optimize the structure of farmers’ capital endowment and foster a positive climate for the entire society to safeguard the environment and strengthen the environmental literacy education system.